Policy & Law
HP has alleged that the owners of Autonomy heavily misrepresented their company's financial state prior to HP's $11.1 billion takeover. The PC giant is taking an "impairment charge" of $8.8 billion thanks to what it calls "serious accounting improprieties." The news comes at a terrible time for HP: its Q4 financial results showed sales were down across the board, with total hardware down 20 percent and laptop / desktop sales down 12 percent year-over-year.
In a call with investors and analysts today, HP CEO Meg Whitman said that the impairment charge is the result of a lengthy internal investigation that began when a senior member of the Autonomy team came forward after Autonomy founder Mike Lynch left HP. The SEC and the SFO (UK Serious Fraud Office) have been contacted in relation to the allegations, and HP is seeking compensation.
"HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology."
When asked who was to blame at HP for the Autonomy takeover, Whitman pointed to her predecessors, saying "the two people that should have been held responsible" — former CEO Leo Apotheker and former CSO Bill Veghte — "are gone." Whitman says that she feels good about the stability of leadership, but notes that most of the board "was here and voted for this deal, and we feel terrible about that. In the end you have to rely on audited credentials [though] and we did." According to Whitman, Autonomy's financials were externally audited twice, by Deloitte and KPMG, and neither of the auditors found any irregularities.
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